Strait of Hormuz Closure Triggers Oil Supply Shock

The closure of the Strait of Hormuz since late February has triggered a major global oil supply shock, disrupting flows of roughly one billion barrels and pushing Brent crude prices above $100 per barrel, with impacts rippling through economies worldwide.

The vital shipping channel, through which about 20 percent of global oil passes, became functionally shut following escalating military tensions in West Asia, including strikes involving the United States, Israel, and Iran that began around February 28. Traders estimate current supply losses at 4 million to 5 million barrels per day, more than double the emergency stockpiles released by major economies shortly after the conflict erupted. International Energy Agency members, including the United States, Germany, and Japan, along with China, tapped 400 million barrels from reserves to cushion the blow, but officials warn these buffers are depleting rapidly after nine weeks of disruption.

Demand destruction has emerged first in industrial sectors such as Asian petrochemical plants and liquefied petroleum gas shipments critical for cooking in India. The effects are now spreading to consumer markets. Airlines across Europe, the...